Legislature(2007 - 2008)
2007-03-16 House Journal
Full Journal pdf2007-03-16 House Journal Page 0482 HB 204 HOUSE BILL NO. 204 by the House Rules Committee by request of the Governor, entitled: "An Act relating to the public employees' and teachers' defined benefit retirement plans; relating to the public employees' and teachers' defined contribution retirement plans; relating to the judicial retirement system; relating to the health reimbursement arrangement plan for certain teachers and public employees; relating to the supplemental employee benefit program; relating to the public employees' deferred compensation program; relating to group insurance for public employees and retirees; making conforming amendments; and providing for an effective date." was read the first time and referred to the House Special Committee on Ways & Means and the Finance Committee. The following fiscal note(s) apply: 1. Zero, Dept. of Administration The Governor's transmittal letter dated March 15, 2007, follows: "Dear Speaker Harris: Under the authority of art. III, sec. 18, of the Alaska Constitution, I am transmitting a bill relating to the public employees' and teachers' defined benefit retirement plans; relating to the public employees' and teachers' defined contribution retirement plans; relating to the judicial retirement system; relating to the health reimbursement arrangement plan for certain teachers and public employees; relating to the supplemental employee benefit program; relating to the public employees' deferred compensation program; relating to group insurance for public employees and retirees; and making conforming amendments. 2007-03-16 House Journal Page 0483 In 2005, FCCS SB 141(2d FCC) (SB 141) was enacted, making changes to the state's teachers' and public employees' defined benefit retirement plans and creating new defined contribution plans, with certain fixed and guaranteed benefits and a new health reimbursement arrangement plan, for new teachers and employees hired under the systems (ch. 9, FSSLA 2005). Following the enactment of SB 141, a number of needed corrections and clarifications of statutes were identified but legislation to address these issues failed to pass last year. The Commissioner of Administration also took steps to adopt regulations to clarify how benefits would be provided under the new plans. Those regulations interpreted the statutes for the new plans in a manner that would secure favorable determinations from the Internal Revenue Service (IRS) that the plans are qualified under the Internal Revenue Code (IRC). Favorable determinations for the defined contribution and occupational disability and death components were received on February 14, 2007. This legislation is intended to provide the necessary clarifications and corrections that remain unresolved. The regulations adopted by the Commissioner of Administration primarily dealt with issues crucial to securing favorable determinations from the IRS. A number of statutory amendments remain necessary to correct and clarify the statutory provisions of the plans, and to assure that benefits are provided in the manner intended by the Legislature. New provisions in this bill are designed to maintain the IRC-qualified status of both the defined benefit and defined contribution plans. While a section-by-section analysis that contains a detailed explanation of the bill will be provided to the Legislature by the Department of Administration, Division of Retirement and Benefits, below is a summary list of the purpose of some of the amendments proposed by the bill: (1) provide statutory authority for funding of the new Teachers' Retirement System (TRS) plan's occupational disability and death benefits; (2) clarify statutory authority for funding of the new Public Employees' Retirement System (PERS) plan's optional monthly 2007-03-16 House Journal Page 0484 pension benefits upon the retirement of disabled peace officers and fire fighters and clarify that employer contributions for defined benefits in the new PERS and TRS plans (occupational disability; occupational death; disabled peace officer/fire fighter optional pension benefit) will be deposited to separate trust accounts; (3) add annual cost-of-living increases to disability benefits, survivor pensions, and optional pension benefits upon the retirement of disabled peace officers and fire fighters provided by the new PERS and Teachers' Retirement System (TRS) plans; (4) add employer cost sharing of medical premiums for persons younger than Medicare age whose disability or survivor benefits are terminated due to eligibility for normal retirement; (5) clarify that a member or survivor is not entitled to elect distributions from the member's individual account while receiving disability benefits or a survivor's pension; (6) provide that elected officials of the state are eligible to participate in the new PERS defined contribution retirement plan; (7) clarify that continuing employer contributions are made on behalf of the surviving spouse and member's dependent children rather than "beneficiaries"; (8) add guidelines for employer participation and termination from the PERS defined contribution retirement plan, including employee designations for participation and rights upon termination; (9) remove residual provisions that allow former defined benefit plan members to reinstate refunded service, effective in 2010; (10) provide authority for the Commissioner of Administration to adopt regulations for the supplemental employee benefits system, health reimbursement arrangement plan, deferred compensation plan, and group health insurance plans; (11) provide a clear definition of "peace officer" and "fire fighter" under the defined contribution retirement plan; 2007-03-16 House Journal Page 0485 (12) allow TRS or PERS defined benefit plan members to participate in the TRS or PERS defined contribution retirement plan if hired by an employer that only participates in the defined contribution plan; (13) allow TRS and PERS defined benefit plan former (refunded) members to become members of the TRS or PERS defined contribution retirement plan if rehired on or after July 1, 2010; (14) revise the method for funding the retirement benefit for survivors of members who are disabled or die from occupational causes, to conform to the IRC; (15) clarify that the new retirement plans established by SB 141 are hybrid plans that fall under IRC sec. 414(k); (16) limit the option of non-vested PERS and TRS employees to transfer to the defined contribution plans to one 12-month window, to conform to the IRC; (17) update rollover provisions of the PERS and TRS plans and the judicial retirement system, to conform to the IRC. The bill includes a delayed effective date of July 1, 2010, for specific sections. These include provisions that remove the opportunity for defined benefit plan members to reinstate refunded service and that allow such members to become members of the defined contribution retirement plans if they are rehired. The remainder of the bill has an immediate effective date. I urge your support of this important legislation. Sincerely, /s/ Sarah Palin Governor"